Justice, FCC Clear T-Mobile Buy of MetroPCS As Likely to Strengthen Market Competition

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By Paul Barbagallo  

The Federal Communications Commission on March 12 approved T-Mobile USA Inc.’s proposal to merge with MetroPCS Communications Inc., as the Department of Justice, in a separate announcement March 12, said it is no longer scrutinizing the deal for potential antitrust violations.

Both agencies said the merger as proposed will not likely result in competitive harms, since the combined company will still be the fourth-largest nationwide wireless carrier in the United States, behind Verizon Wireless, AT&T Inc., and Sprint Nextel Corp.

The new company will only have 42.5 million subscribers, or about 12 percent of the U.S. wireless market. In contrast, the top two carriers, Verizon and AT&T, have a combined market share of 58.5 percent, and the third-largest carrier, Sprint Nextel Corp., has 15.2 percent.

In an order released shortly before a Senate oversight hearing where all five commissioners testified, the FCC concluded that the merger will allow T-Mobile and MetroPCS, now the fourth- and fifth-largest carriers, respectively, to distribute the fixed costs of its networks over a broader customer base and more efficiently use its spectrum resources.

The FCC noted that even after the merger, the new company will still face a shortfall in spectrum needed for 4G LTE (fourth-generation, long-term evolution) wireless network upgrades.

In addition, the transfer of spectrum at issue in the deal is not “unencumbered greenfield” spectrum, and is not likely to “raise rivals' costs or to foreclose entry, expansion, or the deployment of advanced mobile broadband technologies,” the FCC said.

The overlap of the two carriers' spectrum assets encompasses 248 cellular market areas, or CMAs, covering 141 million people, or 46 percent of the population of the mainland United States. In those markets, the company will hold a maximum of 110 megahertz of spectrum post-transaction.

But the FCC found that the number of wireless carriers would be reduced from five to four in only two markets--Miami-Fort Lauderdale and Monroe, Fla.

“…To the extent that [the merger] may result in public interest harms in selected markets, we find that the likely public interest benefits are greater,” the agency wrote.

DOJ Finds No Local, National Antitrust Issue

Meanwhile, in announcing the closing of its antitrust investigation of T-Mobile-MetroPCS merger, the Justice Department said the transaction is not likely to lessen competition in the market, particularly at the local level.

“As the department alleged in its 2011 case challenging the proposed merger of AT&T Inc. and T-Mobile, many dimensions of competition in the mobile wireless industry take place at a national level, including plan pricing, device offerings and network technology,” the division wrote. “Like many local and regional providers, MetroPCS faces limitations, stemming from its lack of nationwide spectrum, networks and scale, and therefore exerts little influence on these aspects of mobile wireless competition.”

Like the FCC, the DOJ said the markets currently served by MetroPCS are also served by all four national carriers.

Praise From Industry, Criticism From Union

The FCC's and the DOJ's action won general praise from the wireless industry, public-interest groups, and members of Congress, but drew some criticism from the Communications Workers of America, which in recent days questioned whether the commission may approve the deal without a vote by the full five-member commission.

Under FCC rules, the agency's chairman's office can issue decisions from the bureaus, avoiding recorded votes by the commissioners.

The union did not oppose the deal, but noted in an ex parte filing March 11 that the T-Mobile-MetroPCS combination would be significantly larger than transactions previously approved without a vote.

The CWA in a March 4 filing said the merger may result in the loss of “a significant number of jobs,” though the union did not supply a figure.

Blumenthal Chides FCC Chair on Process

At the Senate Commerce, Science, and Transportation Committee's FCC oversight hearing March 12, Sen. Richard Blumenthal (D-Conn.) expressed his displeasure with FCC Chairman Julius Genachowski's decision to approve the deal at the bureau level.

“There have been large transactions” approved this way, Genachowski said in response, adding that there were no petitions filed to deny the merger.

“I don't want to take time on this issue now,” Blumenthal said, “but I will have follow-up questions for you.”

The FCC order is available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-13-384A1.pdf

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